Italy GDP Q4 2017

Italy: Economy loses some steam in Q4

February 14, 2018

GDP grew 0.3% over the previous quarter in Q4 in seasonally- and working-day adjusted terms, according to an advance estimate released by the National Statistics Office (ISTAT) on 14 February. The result came in slightly below the 0.4% growth recorded in Q3 and below market analysts’ expectations of another 0.4% increase. According to the press release, the expansion in Q4 was largely driven by growth in the industrial and service sectors; it was restrained, however, by a contraction in the agricultural sector.

In annual terms, GDP grew 1.6% in Q4, marginally down from Q3’s 1.7% expansion. Q4’s reading brings growth for 2017 to 1.5%, notably up from the 1.1% growth in 2016 and marking the highest reading in seven years. However, despite the ongoing recovery, GDP volume in fourth quarter of 2017 was still almost 6% lower when compared to in the first quarter of 2008.

Industrial production continued to grow at a healthy pace in Q4, expanding an average of 3.5% in annual terms, down from an average growth rate of 4.2% in Q3. Moreover, both business and consumer confidence were robust in the quarter, likely benefiting from further improvements in the still-troubled banking sector. On the demand side, preliminary data indicated that both domestic and external demand continued contributing to economic growth. More detailed national accounts data will be released on 1 March.

Despite the consolidation of the recovery, long-standing problems continue to weigh on Italy’s economic performance. These include the second-highest public debt-to-GDP ratio in the European Union, sluggish productivity growth, high taxes and inefficient institutions. Compounding these is a weak banking system, legacy of the last global financial and economic crisis. The economy is nevertheless expected to maintain a reasonable pace of expansion in 2018. Low inflation and further improvements in the labor market will support household spending, while fixed investment should continue growing thanks to favorable financing conditions.

Italy GDP Forecast

FocusEconomics Consensus Forecast panelists see the economy growing 1.4% in 2018, which is unchanged from last month’s forecast. For 2019, panelists expect economic growth to decelerate modestly, to 1.2%.